We study a fair resource sharing problem, where a set of resources are to be shared among a set of agents. Each agent demands one resource and each resource can serve a limited number of agents. An agent cares about what resource they get as well as the externalities imposed by their mates, whom they share the same resource with. Apparently, the strong notion of envy-freeness, where no agent envies another for their resource or mates, cannot always be achieved and we show that even to decide the existence of such a strongly envy-free assignment is an intractable problem. Thus, a more interesting question is whether (and in what situations) a relaxed notion of envy-freeness, the Pareto envy-freeness, can be achieved: an agent i envies another agent j only when i envies both the resource and the mates of j. In particular, we are interested in a dorm assignment problem, where students are to be assigned to dorms with the same capacity and they have dichotomous preference over their dorm-mates. We show that when the capacity of the dorms is 2, a Pareto envy-free assignment always exists and we present a polynomial-time algorithm to compute such an assignment; nevertheless, the result fails to hold immediately when the capacities increase to 3, in which case even Pareto envy-freeness cannot be guaranteed. In addition to the existential results, we also investigate the implications of envy-freeness on proportionality in our model and show that envy-freeness in general implies approximations of proportionality.
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